Increasingly embattled Moamer Kadhafi tries to rally his supporters with a rabble-rousing speech in which he calls for them to fight on as the US imposes sanctions.

In a brief but chilling address in Tripoli's Green Square, Kadhafi told hundreds of cheering supporters to prepare themselves for a fight to defend the city.

Libya's envoy to the United Nations, Mohammed Shalgham, a childhood friend of Kadhafi, became the latest official to abandon him, with a diplomat saying he had joined his deputy Ibrahim Dabbashi in defecting.

"Please, the United Nations, save Libya. Let there be no bloodshed, no killing of innocents. We want a decisive, rapid and courageous resolution from you," Shalgham told the Security Council.

Kadhafi loyalists had earlier killed several people in shooting that spread through Tripoli, and French President Nicolas Sarkozy became the first world leader to openly demand his ouster.

As outraged Western governments scrambled to craft a collective response to a bloody crackdown which has claimed hundreds of lives, the United States said it was moving ahead with unilateral and multilateral sanctions against the regime.

President Barack Obama Friday imposed sanctions on Kadhafi's government, saying the move was intended to target Kadhafi and not the assets of his nation.

Obama wielded presidential power in an executive order, seizing assets and blocking any property in the United States belonging to Kadhafi or his four sons.

The European Union agreed to slap an arms embargo, asset freezes and travel bans on Libya.

The move came hours before the UN Security Council was due to meet to discuss options to respond to Libya's repression of its people, and following complaints that the international response was too slow.

UN chief Ban Ki-moon urged the Security Council to take "decisive action" on the crisis where he said more than 1,000 people have now been killed.

"Loss of time means more loss of lives," he said.

A draft resolution warns Kadhafi that the violence could amount to "crimes against humanity," diplomats said.

Despite demands for action from Sarkozy, British Prime Minister David Cameron and other European leaders, no vote on a sanctions resolution is expected before the weekend, envoys said.

In a rooftop address on Friday, Kadhafi urged his partisans in the square below to "defend Libya." "If needs be, we will open all the arsenals.

"We will fight them and we will beat them," he said as frenzied supporters raised his portrait and waved the country's green flag.

Almost the entire east of the oil-rich North African nation has slipped from Kadhafi's control since a popular uprising began with protests in the port city of Benghazi on February 15.

Hundreds of people have been killed in a brutal crackdown, and tens of thousands of foreigners have scrambled to leave the country.

State television showed the 68-year-old leader repeatedly raising his arms and shaking his fists during the brief appearance while shouting that the Libyan people "love Kadhafi."

"Life without dignity has no value, life without green flags has no value," Kadhafi told them. "Sing, dance and prepare yourselves."

It was Kadhafi's third public statement this week. Previously, he called on his followers to crush the insurrection and later said Al-Qaeda was behind "drug crazed mobs" of young people trying to unseat him.

In Ankara, meanwhile, Sarkozy said "Mr Kadhafi must go," becoming the first world leader to demand the ouster of the former army colonel who seized power in a 1969 coup.

In Tripoli, security forces opened fire indiscriminately on worshippers leaving prayers, desperate to prevent new protests on the weekly Muslim day of rest, residents told AFP by telephone.

Two people were killed in the Fashlum neighborhood and several more in Sug al-Jomaa, witnesses said.

Both are eastern suburbs where security forces had opened fire on previous days, but sustained gunfire was also reported in the western district of Ghut Ashaal.

With police and troops deployed in force outside their mosques, prayer leaders followed texts for their sermons that had been imposed by the authorities calling for an end to "sedition," worshippers said.

The United States withdrew embassy personnel from Tripoli and "shuttered" its embassy for security reasons, the White House said on Friday.

The second city Benghazi, where the unprecedented protests against Kadhafi's four-decade rule first erupted, remained firmly in the hands of rebels, an AFP correspondent said.

Libya's ambassador to Lisbon, Ibrahim Emdored, also defected, denouncing Kadhafi's regime as "fascist, tyrannical and unjust" and calling on him to quit.

Tripoli's ambassadors to France and to the UN cultural organization UNESCO have also quit. The Paris embassy had already been seized by protesters calling themselves the "children of the revolution."

Kadhafi, meanwhile, sought to shore up dwindling support by deploying the country's oil wealth. State television said families would be eligible for $400 (290 euros) each and that some public sector workers could get pay rises of as much as 150 percent.

Dabbashi, who has turned against the regime, said a "psychologically unstable" Kadhafi may kill himself rather than be caught by his opponents.

"He might seek to send some of his family members abroad but I believe he prefers to die in Libya because of his narcissistic character -- he wants to act like a hero," Dabbashi said.

Western governments faced mounting domestic criticism for their failure to organise evacuations more speedily as oil workers stranded in remote desert camps spoke of supplies being looted amid growing lawlessness.

Crude prices rose again as markets continued to fret about the turmoil in the Middle East, despite a promise from the OPEC oil cartel to make up for any loss of production in Libya.

Brent North Sea crude for delivery in April rose 76 cents to $112.12 per barrel, having rocketed the previous day to $119.79 -- the highest level since August 22, 2008 -- before sliding lower as many traders took profits.